Money markets are the markets for assets deal with the short-term lending and borrowing funds with the original maturity period of around 1 year in a short time frames.

Commercial papers, certificates of deposit, asset-backed securities, short-lived mortgage-backed, federal funds, banker’s acceptances, treasury bills etc are some of the products which are generally traded in the money markets. A money market is also known for providing the liquidity funding for the financial system of all around the world.

The money markets comprise the financial institutions as well as the dealers dealing in money or credit wishing either to borrow or lend. Participants of the money market borrow and lend the money for the shorter time periods, typically for thirteen months. Money markets generally trade in smaller term financial instruments commonly known as ‘papers’. These markets are quite different from the capital markets, where when investors deal with the long term funding i.e. usually supplied by the bonds and equity.

A money market, in its core comprises of banks borrowing and lending funds and securities to each other. These securities are often termed as instruments which are priced by reference to a certain offered rate for the appropriate currency and time period. Some companies typically fund themselves with the issue of large amounts of asset backed commercial paper. This is generally secured by pledging the eligibility assets into an ABCP conduit. The eligible assets include credit card receivables, auto loans, residential or commercial mortgage loan, mortgage backed securities and other similar financial assets. Certain big corporations having strong credit ratings issue commercial papers by them only. On the other hand, other large corporations arrange issue of commercial papers for their banks on their behalf through commercial paper lines.

When there comes along a bear market, investors again realize that the stock market can prove risky for their savings. It is a bitter fact that usually flushes out from our mind while we enjoy the returns of a bull market. Unfortunately, this comprises a part of the tradeoff with risk returns. For getting higher returns, you are required to move on to higher risks. Many investors feel it quite hard to invest their money in the volatile market; hence, money markets offer a suitable alternative to the investments involving higher risks.

Money markets are basically known for managing the short-term cash requirements of the government and big financial institutions.

However, money markets are accessible to individual investors through various different securities. A money market can be regarded as a sub-section of the fixed-income market. We generally, relate the term fixed-income with the bonds, whereas bond is only a form of fixed income security. The specialization of money market in very short period debt securities is the main difference between the money market and the bond market. Investments in money markets are also regarded as cash investments due to their maturities in smaller terms.

Money markets are also different from the stock markets and the reason behind this difference is the security trading in the money market at very high denominations. Hence, individual investors are restricted to access it. Furthermore, money markets are the dealer markets where firms deal in buying and selling securities in their own accounts and at their own risk. While comparing this to stock market where some sort of commission is received by the broker to act as an agent, whereas the risk of holding the stock remains with the investor.

Money market mutual funds or the money market bank account is the easiest way of gaining success in the money markets. These funds and accounts combine together the assets of numerous investors for buying the securities in the money markets on their behalf.